GROUPE Danone SA, the Evian bottler that bought baby-food maker Royal Numico NV last year, posted a fivefold increase in secondhalf net income on the sale of its cookie unit to Kraft Foods Inc....

2008-02-15

GROUPE Danone SA, the Evian bottler that bought baby-food maker Royal Numico NV last year, posted a fivefold increase in secondhalf net income on the sale of its cookie unit to Kraft Foods Inc.

Profit in the second half was 3.52 billion euros (US$5.1 billion), up from 649 million euros a year earlier, 12-month figures released by Paris-based Danone indicated yesterday. Full-year net income was 4.18 billion euros, above the 3.25-billion-euro median of 17 analyst estimates in a Bloomberg News survey.

Danone, also the world's largest yogurt maker, bought Numico and left the biscuit business to focus on faster-growing health foods. The company is counting on Numico's Nutricia and Cow & Gate brands for infants to lift profitability as rising milk costs threaten growth. Excluding cookies and Numico, sales growth accelerated in Europe, Danone's biggest market.

"Danone has given reassuring guidance amid a difficult environment for the food sector," said Pierre Tegner, an analyst at Paris-based Oddo & Cie with a "buy" recommendation on the stock.

The company reiterated its sales-growth forecast of eight to 10 percent, excluding acquisitions and currency swings. Operating profit will grow at least 0.3 percent this year, Danone said.

Danone also said Chief Financial Officer Antoine Giscard d'Estaing will leave the company and be replaced by Pierre-Andre Terisse, a former executive with cigarette maker Altadis SA. The company didn't give a reason for the CFO's departure.

Danone rose 2.4 euros, or 4.4 percent, to 56.40 euros in Paris trading, reducing its drop this year to about eight percent. After surging 30 percent in both 2005 and 2006, the shares stalled last year as the trademark dispute with Hangzhou Wahaha Group erupted. The company said sales growth in Europe last year was 7.4 percent, up 5.1 percent in 2006. That excludes six months of Wahaha sales, Numico and the cookie unit last year.

Net income, excluding one-time gains, such as the 3.1 billion euros booked from the cookie sale, increased nine percent to 1.3 billion euros, or 2.71 euros per share, from 1.19 billion euros, or 2.44 euros per share, a year earlier.

Sales from current operations rose 3.6 percent to 14.6 billion euros, beating the 13.2 billion euros estimated in the survey. Bloomberg calculated second-half earnings by subtracting half-year profit from the full-year figure. "The figures seem to indicate a very good fourth quarter and confirmation of strong pricing power," Natixis analysts, including Francois Digard, said.

Sales, including two months of Numico revenue, rose 5.9 percent to 12.78 billion euros from 12.07 million a year earlier. Danone's operating margin widened by 0.45 percentage points to 14.4 percent.

"The group is signing off on a year marked by a number of headwinds," UBS AG analyst Eva Quiroga said. "We believe important catalysts for share-price performance in 2008 to be a solution to the ongoing dispute with Wahaha."